Trump’s election is resposible for swings in the US economy

Because of Donald Trump election, massive fluctuations happened in the United States economy.

One of the latest example of these severe reactions in the US economy came from Friday’s University of Michigan consumer confidence survey. While the index jumped to the highest level in almost two years, it also showed that the mood of the country is extremely divided.

From Richard Curtin

the chief economist of the UMich Survey, in the release:

“When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys. To be sure, an equal number volunteered negative judgments about prospective economic policies, but the frequency of those negative references was less than half its prior peak levels whereas positive references were about twice its prior peak.”

In Gallup’s tracking poll of Americans’ outlook on the economy, there was a very big post-election swing in confidence and optimism between Republicans and Democrats, with the Republicans expressing much more confidence than they had before the election and the Democrats becoming much less optimistic.

On the one hand

you have the stock market, which has been setting new all-time highs  every day since the election. The Dow Jones Industrial Average has hit a new record closing high 13 out of 21 trading days since Trump’s win.

Potential positives at which investors are looking are such as the fact that Trump may roll back regulations of businesses and reduce the corporate tax rate by a much as 20 percentage points.

Stock market  have many significant winners and losers. Financials have grew after being behind most other sectors all year, while technology went from one of the best-performing sectors to severely under performing the S&P 500 index in a matter of weeks.

US Treasury bonds have set multi-year highs during the furious selling. These markets main focus is on the chance of increased inflation and more Federal Reserve rate hikes, leading to the selling.

 

As noted by Curtin

, it is likely that some of this insanity will subside. Much of it has been caused due to expected policies rather than actual ones, meaning that there could be  even more shifts after Trump is inaugurated in January.

“President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance,” said Curtin. “Either too slow growth or too high expectations represent barriers to maintaining high levels of consumer confidence.”

With the jumps in market-based measures of inflation expectations, the increased likelihood of more Federal Reserve hikes, and other macro-economic data points and the moves for the economy have been climatic.

The level of policy uncertainty under Trump is high, so the this reaction may not be a right one.

The final results will probably be somewhere in between the extreme scenarios of a trade war or an unprecedented era of corporate wealth, but that hasn’t seemed to mitigate the wild responses so far.

source : businessinsider.com

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